In its ""August 2011 Budget and Economic Outlook update,"":http://www.cbo.gov/ftpdocs/123xx/doc12316/08-24-BudgetEconUpdate.pdf the Congressional Budget Office (CBO) predicts the government will spend $35 billion less on ""Fannie Mae"":http://www.fanniemae.com/kb/index?page=home and ""Freddie Mac"":http://www.freddiemac.com/ in 2011 than in 2010.
[IMAGE] The CBO estimates it will spend $5 billion on the GSEs in 2011 after having spent $40 billion in 2010.
The CBO says the decrease is mostly due to lower projections in losses for the GSEs in upcoming years.
This updated 2011 estimate is $6 billion lower than the CBO's previous estimate.
This significant decrease in spending on Fannie and Freddie is expected to persist in upcoming years. The total projected spending for Fannie and Freddie over the next 10 years is $51 billion.
This estimate, however, is $10 billion higher than the CBO's previous estimate.[COLUMN_BREAK]
The CBO believes house prices will bottom out soon but not begin a sustainable increase until the second half of 2012. Fewer foreclosures and distressed sales are expected next year.
The CBO expects the Federal Housing Finance Agency's (FHFA) house price index to return to 2004 levels by the end of 2013.
Noting that the FHFA's index differs from the Case-Shiller index by limiting its data to only federally-guaranteed mortgages, the CBO predicts the Case-Shiller index will return to its 2003 levels by the end of 2013.
While 95 percent of mortgages issued in the first half of this year were federally guaranteed, the CBO says this trend may be waning. So far, private lending is picking up for jumbo loans.
Interest rates on federally-guaranteed mortgages have fallen to levels last seen in the 1960s.
Though interest rates are expected to remain low for several years, lending standards are more stringent than they were throughout the housing boom.
In its update, the CBO also noted that high vacancy rates will hinder housing market recovery.
During the first half of 2011, 2.2 million homes sat vacant. While this rate is lower than last year, it remains higher than at any time prior to the recession-both in absolute numbers and as a percentage of total houses.